Creighton economist predicts interest rate increase

Creighton University economist Ernie Goss makes a prediction for 2004: the Federal Reserve will raise interest rates for the first time in months. The “Prices paid index,” a gauge of inflation, is showing an upturn because inflation is increasing at both wholesale and commodity level, pushing up prices, and also oil and natural gas prices are headed upward. The Federal Reserve has cut interest rates 13 times since January 2001, and has not raised them in more than three and-a-half years, since May of 2000. Goss says the “fed” is likely to begin cooling inflationary trends by the second quarter using its power to raise interest rates. He says there’s little doubt interest hikes are on the way, as currently they’re at 40-year lows and one-percent interest rates are lower than normal even for a rebounding economy — he sees a more reasonable rate as three percent. Goss says the fed will likely raise lending rates by a quarter or half a point, so the increase is gradual and doesn’t have a negative effect on the improving economy.